CHAPTER 2.

NEGOTIATING PAYMENT AND PRICE

1. Provision 6: PAYMENT – METHOD OF PAYMENT
a. Definition
To succeed in today’s global marketplace and win sales against foreign
competitors, exporters must offer their customers attractive sales terms supported by
appropriate payment methods. Because getting paid in full and on time is the ultimate
goal for each export sale, an appropriate payment method must be chosen carefully to
minimize the payment risk while also accommodating the needs of the buyer.
The main international payment methods used around the world today include:
1. Telegraphic transfer (T/T)
2. Letter of Credit (L/C)
3. Documentary Collections
 Documents against acceptance (D/A)
 Documents against Payment (D/P)
4. Open Account

b. Example

2. Provision 7: PAYMENT – MEDIUM OF EXCHANGE

a. Definition
A medium of exchange is an intermediary instrument or system used to facilitate
the purchase and sale of goods and services between parties. For a system to function as
 a medium of exchange, it must represent a standard of value. Further, all parties to the
transaction must accept that standard.
b. Purpose
As noted, the primary purpose of a medium of exchange is to smooth
transactions between parties. An effective medium of exchange has a reasonably
stable value that is known and accepted by all parties.
That relative stability gives currency, as the primary medium of exchange,
another important purpose: It can be stored for a long period of time. The concepts of
saving and investing evolved from the potential of currencies to serve over the long
term as stores of value.
Money acts as an intermediate in the exchange process, it is called a medium of
exchange. A person holding money can easily exchange it for any commodity or service
that he or she might want.
c. Example
Example 1: The buyer must pay us all sums due under this agreement in Singapore
dollars. If the seller receives payment in a currency other than Singapore dollars, the
seller has the right to convert it to Singapore dollars at such time and rate of exchange
as the seller may in their reasonable discretion adopt in accordance with their usual
practice. the buyer must bear all exchange risks, and reasonably incurred losses,
commissions, fees, and charges which may thereby arise.
Translate:
Người mua phải thanh toán cho người bán tất cả các khoản tiền đến hạn theo thỏa
thuận này bằng đô la Singapore. Nếu người bán nhận được khoản thanh toán bằng một
loại tiền tệ khác với đô la Singapore, người bán có quyền chuyển đổi nó sang đô la
Singapore tại thời điểm và tỷ giá hối đoái mà theo quyết định hợp lý của họ, người
bán có thể  áp dụng theo thông lệ thông thường của họ. Người mua phải chịu mọi rủi
ro trao đổi (hối đoái) và phát sinh hợp lý các tổn thất, hoa hồng, phí và lệ phí có thể
phát sinh.
 A. contradict:  to say the opposite of what someone else has said, or (of one fact or
statement) to be so different from another fact or statement that one of them must be
wrong:
=> He kept contradicting himself when we were arguing - I think he was a bit
confused.
B. intervene: can thiệp - to become involved intentionally in a difficult situation in
order to change it or improve it, or prevent it from getting worse
=> The superpowers began to intervene in local struggles in Africa
C. Deception - Lừa dối
=> Most advertising involves at least some deception.
D. bear all exchange risks: chịu rủi ro hối đoái ( trao đổi )
=> Anny has to bear the risk of meeting any losses
Example 2: Except as expressly provided otherwise in this Agreement, all currency
denominations shall be in United States dollars. Except as expressly provided
otherwise in this Agreement, any conversion of Canadian dollar amounts to United
States dollar amounts for any purposes in connection with this Agreement shall be
done using the spot exchange rate quoted in the latest edition of THE WALL STREET
JOURNAL available before the date on which any payment must be made.
Translate:
Trừ khi có quy định rõ ràng khác trong Thỏa thuận này, tất cả các mệnh giá tiền tệ sẽ
được tính bằng đô la Mỹ. Trừ khi có quy định rõ ràng khác trong Thỏa thuận này, bất kỳ
việc chuyển đổi số tiền đô la Canada sang số tiền đô la Mỹ cho bất kỳ mục đích nào liên
quan đến Thỏa thuận này sẽ được thực hiện bằng cách sử dụng tỷ giá hối đoái giao
ngay được trích dẫn trong ấn bản mới nhất của THE WALL STREET JOURNAL có
sẵn trước ngày mà bất kỳ khoản thanh toán nào phải được thực hiện.

3. Provision 8: EXCHANGE RATE

a. Definition
Exchange rate is the value of one currency in relation to another. It represents how
much of one currency can be exchanged for another. Exchange rates are determined by
 market forces of supply and demand, and they fluctuate constantly depending on
various economic factors such as inflation, interest rates, and geopolitical events.
b. Features
 Exchange rates are important for international trade and finance, as they
determine the cost of goods and services when they are traded between countries
with different currencies. They also impact the value of international investments
and can affect the profits and losses of businesses operating in different countries.
 Exchange rates can be expressed in two ways: direct and indirect quotes. A direct
quote expresses the value of a foreign currency in terms of the domestic currency,
while an indirect quote expresses the value of the domestic currency in terms of
the foreign currency.
c. Example
Example 1: Exchange Rate Adjustment. 
Gap filling: The Lenders acknowledge that the terms of this Clause 21 have been
agreed on the basis of the exchange rates set out in the Business Plan and that in the
event that the Parent is able to demonstrate to the satisfaction of the Finance Parties
(acting reasonably) that any breach of Clause 21.1 has arisen solely as a result of a
movement in any exchange rates after the date of this Agreement, the Finance Parties
will instruct the Agent to negotiate in good …. with the Parent to agree replacement
financial covenants which provide the Finance Parties with equivalent protection to that
offered by the financial covenants set out in Clause 21 as at the date of this Agreement.
A. Faith
B. Belief
C. Confidence
D. Conviction
Answer: A
Explanation: in good faith with something

Example 2: FIXED EXCHANGE RATE.

Gap filling: If any items addressed in this agreement (including the Disclosure
Schedules and exhibits) are … in Canadian dollars and settled or otherwise agreed to
 by the Parties after the Closing Date, then payments will be made, if in United States
dollars, using the exchange rate for the Canadian dollar against the United States dollar
as of the date hereof as reported in the Wall Street Journal.
A. Denominated
B. Addressed
C. Called
D. Named
Answer: A
Explanation: We use “denominate” to describe shares, bonds, etc. that are in a
particular currency.

4. Provision 9: COSTS & CHARGES – DUTIES & TAXES

a. Definition
The term "duty" refers to a form of taxation levied on certain goods, services, or
other transactions. People and corporations may be required to pay levies on imports
and exports by governments in the form of customs duties and other taxes.
b. Purpose
This is done in order to collect revenue and to satisfy other economic reasons.
Duties are enforceable by law and may be imposed on commodities or financial
transactions instead of individuals.
c. Understanding a Duty
 Governments impose taxes on individuals and companies that make or receive
shipments internationally. These levies must be paid before delivery can be made
and they are called customs or import duties. These are tariffs or taxes imposed on
goods transported across international borders.
 Customs duty rates are a percentage determined by the total value of the goods
paid for in another country. The quality, size, or weight of the product are not
determining factors. The Harmonized Tariff System of the United States is used
domestically as a reference for applicable tariffs on merchandise imported to the
country.
  The intent of this form of duty is to provide a form of commerce protection for
each country's jobs, economy, environment, and other interests by controlling the
influx and outflow of merchandise. Duties may be imposed on restrictive and
prohibited goods that are shipped in and out of a country. The imposition and
collection of duties also help contribute to a nation's revenue pool.
d. Example
Gap filling: The Contract price shall exclude all Value Added Tax (VAT) applicable in
terms of legislation. Such VAT shall be shown as a separate component of the Contract
price. The Buyer shall be responsible for the payment to the relevant Authorities of any
and all customs and excise duties or ……………….. levies or any other costs incurred
by the Seller relating to the execution of the Order.
A. regulatory
B. juridical
C. statutory
D. obligation
Answer: C
Explain
A. regulatory: relating to the activity of checking whether a business is working
according to official rules or laws
B. juridical: relating to the law
C. statutory: decided, controlled, or required by law
D. obligatory: If something is obligatory, you must do it because of a rule or law
Translate
Giá Hợp đồng không bao gồm các loại thuế Giá trị gia tăng (VAT) áp dụng theo luật
định. Thuế GTGT này sẽ được trình bày thành một phần riêng biệt trong giá Hợp đồng.
Người mua phải chịu trách nhiệm thanh toán cho các Cơ quan liên quan có thẩm quyền
với mọi khoản thuế hải quan và thuế tiêu thụ đặc biệt hoặc các khoản phí theo luật định
hoặc bất kỳ chi phí nào khác mà Người bán phải chịu liên quan đến việc thực hiện đơn
hàng.

5. Provision 10: COSTS & CHARGES - INSURANCE

a. Definition
 Export credit insurance
 It is a guarantee of payment for the exporter from a third party, an insurance
company, which issues an export credit insurance policy covering the risk of non-
payment. The insurance company will pay the exporter in case the buyer fails to
do so. 
 The exporter has to pay the costs for that guarantee. 
 Bank guarantee
 A bank guarantee is a guarantee of payment for the exporter from a third party, a
bank. The bank may issue a bank guarantee, assuring that the bank will pay for the
exporter in case the buyer fails to do so. 
 The buyer has to pay the costs of that guarantee.
 Distinguish Export credit insurance and Bank Guarantee? 

o Same: Both of them are guarantee of payment from a third party, providing the
exporter with some level of security in terms of payment.
o Difference: 

 For Export Credit Insurance, the exporter has to pay for that guarantee while
it is the buyer who pays for a Bank Guarantee. 
 The third party offering export credit insurance is the insurance company
while the bank offers a bank guarantee. 

b. Purpose

The purpose of Export credit insurance and Bank guarantee is to protect a seller
from the risk of non-payment by a foreign buyer due to commercial risks such as buyer
insolvency, bankruptcy, default, or political risks including civil war, famine, lack of
foreign exchange, and so on.

c. Example 
 Gap filling: The Bank Guarantee must be ………… to the form herein attached as
Annex F. The Bank Guarantee shall be in force until the date specified in clause 3 of
Annex F and shall guarantee all the payments due under the Contract.

A. conformed
B. followed
C. observed
D. complied
Answer: A
Explain:
A. conform to/with something: to obey a rule or reach the necessary stated standard. Ex:
Before buying the baby's car seat, make sure that it conforms to the official safety
standards
B. follow: to obey or to act as ordered by someone. Ex: I decided to follow her advice and
go to bed early.
C. observe: to obey a law or rule, or celebrate a holiday or religious event in a
traditional way. Ex: You must observe the law.
D. comply with: to obey an order, rule, or request. Ex: Comosa says he will comply
with the judge’s ruling.
Translate:
Bảo lãnh Ngân hàng phải được tuân thủ theo mẫu được đính kèm sau đây trong Phụ
lục F. Bảo lãnh Ngân hàng sẽ có hiệu lực cho đến ngày được quy định tại khoản 3 của
Phụ lục F và sẽ đảm bảo tất cả các khoản thanh toán đến hạn theo Hợp đồng.

6. Provision 11: COSTS & CHARGES - HANDLING

a. Definition
In the simplest term, the handling fee is an amount charged to customers on top of
their order subtotal and shipping fees to cover the additional costs of packaging a sale
and preparing it for shipment. Sellers must consider how handling fees may affect
customers and sales in addition to their own interests. For example, if handling fees are
seen as excessively high, clients may be dissatisfied. Some sellers include the handling
charge in the total price, while others add it to the invoice as a distinct line item. Make
 sure it’s clearly stated on the invoice if you’re going to list it as a line item. This way,
customers won’t blame sellers for overcharging them.
A handling fee covers the cost of fulfillment-related charges, such as packing fees
based on required labor. It can, however, also include:
 Warehouse storage costs: This is the fee charged by the warehouse for keeping
your goods on-site.
 Postage, taxes, fuel charges, and additional expenses for particular shipment
options, such as expedited delivery, can all affect shipping prices.
 Boxes, protective materials, and tape may be included in packaging expenses. It
might also include other minor features, such as branded tissue paper or stickers,
to help your business stand out.
b. Purpose
Given the fact that no matter how simple a shipment is, the shipping line and
forwarder take time to handle it. Therefore, a “Handling costs and charges” provision is
vital in international trade contracts. Handling fees allow shipping lines and forwarders
to keep their profit margins while also covering the additional costs of selling. They
have to charge handling fees if things like inventory carrying costs, packing materials
costs, and labor hours for order fulfillment haven’t been considered.
c. Example 
Gap filling: A 15% handling fee may be ………. ALL RETURNS of correctly supplied
non-defective goods, which returns must be submitted within 7 days of delivery
together with proof of purchase, in the original packing and re-saleable. The buyer shall
not claim a refund or remedy and accept full responsibility should the goods be
damaged due to misuse, abuse, or gross negligence on his or her part.
A. Levied on
B. Imposed on
C. Dutied on
D. Charged for
Answer: A
Explain:
C. Duty also refers to a tax or kind of money paid on goods that are bought or
imported. However, it doesn’t exist in the form of a verb, only a noun. So answer C
is eliminated.
D. charge means to ask an amount of money for something, especially a service or
activity. Generally, it does not have a strong legal binding meaning, so not really
appropriate in case of law.
B. "impose" and A. "levy" are used as synonyms. Having looked up in various
dictionaries as well as other sources, I found that they have had very similar
meanings since the beginning of their use. However, the phrase “levy on” is, to some
extent, popularly used in international trade contracts so here the most appropriate
answer is A.